The evolution of wages in China from the late 1970s to the present.
Analysis from a historical and international perspective.
Executive Summary:
● Between 1978 and 2022, the average real wage in urban areas has grown by 2,406%. This means that purchasing power in 2022 is 25 times higher than that of 1978.
● Throughout the period, there are different phases of growth. Between 1978 and 1989, real wages showed a volatile behaviour. Since the 1990s, they have shown sustained growth, reaching record annual rates in the 2000s after joining the WTO and showing a slowdown after the global crisis in 2008.
● These wage trends were part of a restructuring of the functioning of the urban labour market. Starting from an almost absolute predominance of state-run wage employment in the late 1970s and a universal social security system, the expansion of activity in private companies (local and international) and self-employed workers has been reflected in the presence of greater heterogeneity in wages and working conditions within urban areas.
● Salary levels show a great disparity throughout the period in different regions of the country, being markedly higher in the eastern and southeastern areas. A snapshot from 2022 shows Shanghai and Beijing as the municipalities with the highest salaries and Henan as the province with the lowest salaries in the country.
● The trend of sustained wage growth has also been observed decades ago in other large economies in the region such as Japan and South Korea. However, for the year 2017, it was estimated that the average purchasing power in China was still 59.4% of that of Japan and 57.9% of that of South Korea.
● The wage trend in Latin America contrasts with that seen in China. Of the cases shown, Mexico has shown stagnation for more than two decades and Argentina has shown great volatility, alternating periods of high growth with declines. Chile has shown slight stagnation between the late 1990s and early 2000s, but sustained growth since 2009.
● Starting from a markedly lower level in 1990, the high rate of wage growth in China has meant that by 2017 wages will have reached a purchasing power similar to that in Argentina and Chile.